Emerging Themes in the Australian & Global Health Systems

Emerging Themes in the Australian &

Global Health Systems

2013 Annual Stockbrokers Conference - 31

_{May 2013}

Ramsay Health Care

• 117 hospitals in Australia, Indonesia, UK & France

• Circa 10,000 beds

• Employs more than 30,000 people

• Admits over 1 million patients per annum

• Market Cap: $7.0 billion

CONSISTENTLY DELIVERING STRONG

TOTAL SHAREHOLDER RETURNS (TSR)

11-Apr-13 2,959%

11-Apr-13 295%

* Ramsay Health Care listed on ASX – 23 September 1997 Source: FactSet, Macquarie Research

Compound Annual Rate of Growth over 15½ years

Ramsay Health Care TSR 24.6%

Vs.

S&P/ASX 100 Acc. Index 9.2%

OUR FORMULA FOR SUCCESS

• Management and culture:

– Long term, stable management team, special culture (“The Ramsay Way”)

– Ramsay can export proven management model & blend it with local expertise

• Modus operandi and strong growth strategy:

– Ramsay’s growth strategy has remained clear & consistent – Focused solely on operating & managing private hospitals – Manage & invest for the long term

– Focus is on the provision of quality care – profits will follow

• Financially disciplined:

– Growth only pursued if financial & strategic criteria & investment hurdles (15% ROIC) are satisfied

STRONG GROWTH STRATEGY

Must add long-term value to shareholders

Sustainable growth enhanced by focusing on hospitals & taking a prudent approach to acquisitions

Ramsay Health Care in 2013

•

Solid performance across worldwide portfolio

•

Completed projects to meet the growing demand in the

ongoing brownfield capacity expansion programme (investing

>$100m pa)

•

Recently entered a JV with Malaysian conglomerate Sime

Darby to expand healthcare footprint into SE Asia

•

In process of acquiring Peel Health Campus in WA – a

privatised public hospital

•

Continued growth in treating publicly funded patients in UK

-NHS patients now represent over 70% of our UK admissions.

•

Selected in 2013 in the Global100 as one of the Most

Sustainable Corporations in the World for the second year in a

row

Strong Industry Fundamentals - Global

• Growth in demand for health care will continue to

be supported by:

– Ageing population

– Increased chronic disease burden

– Increased expectations

– Increased capabilities:

• Surgical techniques

• Devices

• Pharmacology

• Biotechnology

• By 2050, the number of people aged 65+ will total just under 1.5 billion, or 16% of the global total. In 1950, it was only 5%. (UN 2009). • This ageing population is without parallel in the history of humanity.

Global Market Trends in Healthcare

• Governments around the world are increasingly

concerned about the rising costs of health care

• Patients demanding and willing to pay for higher

quality health care

• Increasing GDP and affordability driving growth

for private operators

• Significant growth in health care spend expected

in emerging markets

Strong Industry Fundamentals

• Balanced health care system

– Cultural – Political – Financial

• Industry features

– Respected private providers – Choice & access

– Low cost attractive insurance product – Comprehensive cover

– Community rated – 30% rebate

– Lifetime health cover

UNDERPINS

ONGOING

STRONG

PARTICIPATION

IN PRIVATE

HEALTH

Australian Healthcare Sector Themes

Grattan Institute Report released

recently reveals:

• People are seeing more doctors & having more tests

• If the scope of health services

continues to increase at the rate of the last decade (74%), health will demand an additional 2% of GDP by

2023;

• Health will be the biggest

contributor to Australia’s budget deficit by 2023

Who Will Pay?

• In Australia, the cost of health & aged care across

Federal & State Governments is expected to almost

double over the next four decades

• Based on current rates of population growth & ageing, the

cost to governments of care will grow to 14.5% of GDP by

2049-50 from 8% in 2009-10

• Deloitte’s modelling suggests spending on health & aged

care will consume 45.8% of total Commonwealth

The Private Hospital Sector Australia

• Treat 43% of all hospital patients (3.6 million);

• Provide 33% of all hospital beds;

• Perform 66% of all elective surgery;

• Of the 664 Diagnostic Related Groups undertaken in

Australian public hospitals, 660 are performed in private

hospitals;

• Growth in separations – last 10 years:

– 23.1% in public acute hospitals;

– 66.9% in private hospital;

• If current rates of growth continue, in 2021 private

hospitals will be treating 50% of all hospital patients.

Australian Health Care Costs

In 2010/11:

• $130.3b spent on healthcare in Australia in 2010/11 (recurrent

expenditure)

• $38.9b spent on public hospital services

• $10.8b spent on private hospitals

• The government paid out $4.63b in PHI rebates

• Total Medicare benefits paid for services to private patients in

public & private facilities was circa $1.8b in FY08

• Total PBS benefits paid for prescription drugs in private

facilities was circa $0.75b

The Role of the Private Sector in Public

Healthcare

• In Australia, State governments are looking more to the private sector to build, own and operate public

hospitals (eg Qld Health Blueprint)

• State Governments are procuring more input from private sector in

planning, building & operating public hospitals eg Joondalup; Midlands; Sunshine Coast & Northern

Beaches

• In the UK, it is now the legislative right of NHS patients to be treated in the private hospital sector

Successful Public/Private

Collaborations

Joondalup Health Campus:

• 650 bed public/private hospital • $393m expansion completed in

March

• Largest hospital in Perth’s northern corridor

• Agreement with WA government • Treated public & private patients

since 1996

• In 2012 – 90,000 Emergency

Department presentations (one of busiest in the country); 60,000 admissions

Sunshine Coast University Private Hospital

• Public/Private 200 bed hospital being built in partnership with Queensland health

• 5 year contract to treat public patients

• Opening in late 2013

Successful Public/Private

Collaborations

The Role of the Private Sector in Public

Healthcare

• Unions will campaign against

privatisation using the following

myths:

– The private sector will

“cherry pick”

– Private sector will cut corners

– Less focus on safety &

quality

– No commitment to teaching

& research

Public v Private

Public Healthcare

• Monopoly

• No fear of failure

• No need to make a profit

Private Healthcare

• Competitive market

• Absolute fear of failure

Productivity Commission Findings 2010

• On average treatment in private hospitals costs $130 less

than in public hospitals

• When looking at the costs that private hospitals can

control they cost 32% or $1,089 less than public hospitals

• Private hospitals have a more complex casemix than

public hospitals

• Where comparable safety & quality data exists, private

hospitals are shown to be safer than public hospitals

• Private hospitals offer more timely access to elective

surgery

• Private hospitals carry out more elective surgery with

patients from disadvantaged socioeconomic backgrounds

than public hospitals

Teaching in the private sector

• Private hospitals deliver >500,000 days of clinical training (medical/nursing/allied

health) each year. (HWA)

• Approx 50 private hospitals in Australia

currently support undergraduate training for medical students (Productivity Commission report 2010)

• In 2010, approx 110,000 clinical placement days in the private sector were for medical students

• Increasing complexity of case mix in private hospitals provides improved training

opportunities

• In 2012, there were 600 medical specialist training posts in the private sector

Summary

• Ageing demographic & growing disease burden - leading

to increased demand for healthcare

• Rising costs - leading governments across the globe to

consider healthcare reform

• Private sector offers efficient & effective models of

healthcare delivery

• An expansion of the traditional private sector role by way

of involvement in public healthcare delivery is inevitable